Is Mr D.I.Y. Group (M) Berhad's (KLSE:MRDIY) Latest Stock Performance A Reflection Of Its Financial Health?

Most readers would already be aware that Mr D.I.Y. Group (M) Berhad's (KLSE:MRDIY) stock increased significantly by 12% over the past three months. Given the company's impressive performance, we decided to study its financial indicators more closely as a company's financial health over the long-term usually dictates market outcomes. In this article, we decided to focus on Mr D.I.Y. Group (M) Berhad's ROE.

ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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How Do You Calculate Return On Equity?

The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity

So, based on the above formula, the ROE for Mr D.I.Y. Group (M) Berhad is:

31% = RM598m ÷ RM1.9b (Based on the trailing twelve months to March 2025).

The 'return' is the amount earned after tax over the last twelve months. So, this means that for every MYR1 of its shareholder's investments, the company generates a profit of MYR0.31.

See our latest analysis for Mr D.I.Y. Group (M) Berhad

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company's future earnings. Depending on how much of these profits the company reinvests or "retains", and how effectively it does so, we are then able to assess a company’s earnings growth potential. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don’t share these attributes.

Mr D.I.Y. Group (M) Berhad's Earnings Growth And 31% ROE

Firstly, we acknowledge that Mr D.I.Y. Group (M) Berhad has a significantly high ROE. Second, a comparison with the average ROE reported by the industry of 12% also doesn't go unnoticed by us. Probably as a result of this, Mr D.I.Y. Group (M) Berhad was able to see a decent net income growth of 14% over the last five years.

Next, on comparing with the industry net income growth, we found that Mr D.I.Y. Group (M) Berhad's reported growth was lower than the industry growth of 20% over the last few years, which is not something we like to see.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock's future looks promising or ominous. Is Mr D.I.Y. Group (M) Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.

Is Mr D.I.Y. Group (M) Berhad Efficiently Re-investing Its Profits?

With a three-year median payout ratio of 49% (implying that the company retains 51% of its profits), it seems that Mr D.I.Y. Group (M) Berhad is reinvesting efficiently in a way that it sees respectable amount growth in its earnings and pays a dividend that's well covered.

Moreover, Mr D.I.Y. Group (M) Berhad is determined to keep sharing its profits with shareholders which we infer from its long history of five years of paying a dividend. Our latest analyst data shows that the future payout ratio of the company is expected to rise to 72% over the next three years. Despite the higher expected payout ratio, the company's ROE is not expected to change by much.

Summary

In total, we are pretty happy with Mr D.I.Y. Group (M) Berhad's performance. Particularly, we like that the company is reinvesting heavily into its business, and at a high rate of return. As a result, the decent growth in its earnings is not surprising. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.